A Chinese heavy-equipment manager last week reached an agreement to acquire the Hummer off-road vehicle from General Motors, marking China's first major entry into the U.S. car manufacturing business.
Sichuan Tengzhong Heavy Industrial Machinery Corp. agreed to pay $150 million for the brand. GM's bankruptcy filing last summer estimated that the oversized SUV-brand could bring in $500 million or more. The investors will also get Hummer's nationwide dealer network.
Under the terms, GM will continue to manufacture the vehicles until no later than 2012, when Tengzhong will take over production. Hummer's current management team will stay with the new company, which will be headquartered either in Detroit or Auburn Hills, Mich.
The U.S. and Chinese governments still must approve the deal. Chinese regulators had expressed concerns regarding Tengzhong's ability to bring the brand to profitability and how Hummer ownership would fit with the country's national push for energy efficiency.
"One of the big issues we have is to convince them Hummer will not stay as is," Jim Taylor, who will remain Hummer's chief executive, told the Wall Street Journal. "That it can be a lot greener and a lot more fuel-efficient than it is."
Sales of the Hummer, which epitomized America's gas-guzzling habit, peaked at 71,524 in 2006 before gas prices started rising. Only 8,193 Hummers have been sold in the U.S. through the first nine months of the year, down 64 percent from a year earlier.
In an interview with The Associated Press, Mr. Taylor said the key to any turnaround will be quickly rolling out more fuel-efficient models that get over 20 miles per gallon. Hummer's smallest model now gets 16 mpg.
Hummer, he said, has been in a state "suspended animation" since GM announced in June 2008 that it would be sold or closed. Funds for marketing, new products and lease financing all dried up, he said. Nonetheless, Mr. Taylor said 1,000 Hummers were sold in some months, proving that fans are out there.
"There's still a loyal customer base underneath there that loves Hummer," he said.
Discussion Questions: What do you think of a Chinese firm buying Hummer? What's the likelihood that Chinese firms will be increasingly buying more U.S. brands? What do you think of the chances for Hummer's turnaround?